Northern Arc Capital (formerly IFMR Capital)

A cross-sectional study discovers untapped potential

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In 2014, LeapFrog Labs and Northern Arc Capital (formerly IFMR Capital) designed a cross sectional study to assess the unmet insurance needs of more than 15 million credit clients in the Northern Arc network.

Northern Arc and LeapFrog Labs interviewed nearly 1,200 existing clients, 80% of whom were low income earners, and found significant gaps in insurance access, as well as existing perceptions of insurance that impede take-up. This study was conducted in collaboration with Microsave, India.

A whistle-stop tour of findings

Protecting the primary earner The highest demand for protection is centered around covering the primary breadwinner with key products such as life insurance, accident cover, and hospitalisation cover. This indicates where the biggest family needs are, and informs early product strategies.

A potential $120m untapped market exists While most customers have credit life insurance due to their existing relationships with lenders, 77% report no additional risk protection products. This opens up an opportunity to provide other critical risk products such as life, health, and asset cover; even at a premium cost of only $1 per month, this represents a potential $120 million market in IFMR’s network alone.

Mobile phones have blue-sky potential for payments and education An astounding 94% of respondents had a mobile phone, and 78% a formal bank account. Allowing customers to purchase insurance via mobile may improve the customer experience. Mobile phones can also increase insurance awareness, build trust, and provide on-going education and tailored services.

A hidden market exists, with spend beyond insurance significant Respondents reported spending an estimated $2.7 billion over the past five years on healthcare, and $11.7 billion on asset purchases. This gives initial glimpses into the massive commercial size of the emerging consumer opportunity.

The power of insights

Northern Arc has used the findings from this study to help its network of originators to manage risk better, both for themselves and their end-clients. This includes new product research and workshops aimed at finding ways to protect low-income households from the aftermath of natural catastrophes including floods and droughts.

IFMR Holdings and the Asian Development Bank organised a joint workshop on this topic, convening high quality originators, data scientists, climatologists, insurers, reinsurers, social impact investors and regulators. The workshop group agreed to create protection for catastrophic risk, and to unite for shared initiatives and solutions.